Nike Shares Slip on Report of SEC Probe Into Basketball Recruiting Scandal Payments

Nike could face an SEC probe into allegations it paid top basketball recruits in order to steer them to certain universities connected to the sportswear giant.

Nike Inc.  (NKE) - Get Report shares slipped lower in pre-market trading Thursday amid reports the sportswear giant is being investigated by the U.S. Securities and Exchange Commission for making allegedly illegal payments to youth basketball players.

Bloomberg reported that the SEC probe was confirmed by a former Nike lawyer, Scott Wilson, after it was declared in opening remarks by Howard Srebnick, who is representing Michael Avenatti in the disgraced attorney's trail for attempting to extort as much as $25 billion from the company. 

The U.S. Department of Justice alleges Avenatti threatened to go public with information linking the company with illicit payments to top-tier college basketball recruits unless it agreed to pay him between $15 million and $25 million to conduct an internal investigation. 

Avenatti says his negotiations, on behalf of a Nike-sponsored youth basketball coach, Gary Franklin, fell within the law and that Nike is attempting to conceal the fact it made payments to the high-profile recruits in order to steer them to Nike-connected universities. 

"It's true. Mr. Avenatti is brash," Srebnick told the jury in Manhattan federal court Thursday. "Tenacious, bullish, hard charging ... At times he may be offensive. But that's not what we put people in prison for." 

Nike shares were marked 0.3% lower in early trading Thursday at $99.58 each, trimming their three-month gain to around 10.7%.

Last year, the DoJ said it would charge Avenatti -- who represented the adult film star known as 'Stormy Daniels' in lawsuits linked to President Donald Trump -- with extortion just minutes after the controversial attorney tweeted about exposing a "major high school basketball scandal" linked to the world's biggest sportswear company.

US attorney Nick Hanna said Avenatti, whom he called "a corrupt lawyer who instead fights for his own selfish interests by misappropriating close to a million dollars that rightfully belonged to one of his clients", faces a maximum of 50 years in federal prison if convicted on all counts of bank and wire fraud in California.